Vaccine rates are up, and quarantine restrictions are down, which means many people who’ve been stuck at home during the Covid-19 pandemic over the past year can finally resume traveling again. But there’s a new obstacle sojourners will face: A shortage in rental cars across the US, and a surge in costs, up to $700 a day, for available vehicles.
For much of the pandemic, recreational travel essentially came to a halt. That devastated the airline and hospitality industries, and also, car rental companies. Demand for rental automobiles fell roughly 90 percent at the start of the pandemic last year, the Orlando Sentinel reported.
This left companies without a choice but to sell a significant portion of their fleets to stay in business.
Interest in renting automobiles is soaring now — from customers eager to take road trips to those who are flying to destinations and require a mode of transportation. But rental car companies haven’t yet been able to replenish their supply due to a dearth of vehicle availability across the industry.
“I think madhouse is probably a good way to describe it,” Jonathan Weinberg, CEO of AutoSlash.com, a website that pairs customers with car rental deals, told the Sentinel. “We are benefiting in some ways from the madness. The problem is that in many cases we just can’t find cars for people.”
Major rental car companies, like Hertz and Avis for example, sold more than 500,000 of their vehicles last year to stay afloat, according to CBS 8. It was likely a prudent move at the time. Each car costs a company about $35,000 to $40,000 a pop to maintain.
“They didn’t have any cash coming in, so they had to stop the cash from going out,” Michael Taylor, of JD Power, a global market research company, told CBS 8. “So they divested themselves of several hundred thousand cars.”
With limited vehicles available, prices for rental cars have skyrocketed across the United States. Costs for car rentals have jumped by 30 percent nationwide, but have climbed as high as 300 percent in certain tourist hotspots, Weinberg told The Points Guy.
In Hawaii, where rental vehicles now cost up to $700 a day, there’s been a “considerable uptick” in U-Haul rentals among tourists desperate to find a way to get around, Kaleo Alau, president of U-Haul Company in Hawaii, told Insider.
It’s unclear when rental car companies will be able to meet their customers’ needs again, due to a global semiconductor chip shortage, which continues to wreak havoc on the automotive industry.
A semiconductor chip is a bite-sized electric circuit that powers much of what we use daily— from computers and home appliances to various parts of vehicles, including GPS and driver assistance systems.
When the pandemic first hit, manufacturers cut down on chip orders, believing that consumers would hold back on spending, according to Bloomberg. But demand spiked for chip-dependent products, including such essentials as, laptops, tablets, and gaming consoles.
The chip shortage, which is likely to last another six months, is expected to result in 1.28 million fewer vehicles being manufactured in the United States this year, according to the Alliance for Auto Innovation.
But while rental car companies struggle to meet their customers’ needs, and travelers scramble to figure out transportation options, rideshare companies, including Uber and Lyft, may be able to swoop in and capitalize on the overwhelming demand.
“The low inventory among the legacy rental car companies is going to provide opportunities for emerging players in the car share space,” said Mike Landau, CEO of mobility hub company ParkMyFleet.